How to Analyze Price Range
One of the strategies commonly used by forex traders is to take advantage of the daily average range. Many argue that if the price has moved and reached its daily range then it is time to open a position. This means that if the price moves up and has reached the daily average range, it's time to sell, and vice versa.
Daily Average Range Used as Reference Open Position
Some argue that it is not safe because we can only get information – at least an estimate – how much price volatility was on that day. Traders cannot know how many pips the price will actually move (up or down). Price movements can often be strongly influenced by fundamental factors. That is, even if the trader knows that the daily average range is – say 1000 pips, but if later the country's central bank announces that they will cut interest rates, the market may move more than 1000 pips. This is one reason why we should be aware that there are daily range inconsistencies. Anything can happen to the market at any time.
Use of Daily Average Range for Profit Target
In this way, traders will still be able to maintain positions and re-analyze market reactions when prices reach their daily average range. If the price movement continues, the trader can maintain the trader's position. On the other hand, if there are signs that the market is getting saturated, then the trader can predict that the momentum of price movement has started to decline and that might be the right time to close the position. This strategy will allow traders to "secure" the profits that have been obtained from transactions that traders have made. But remember that this method should be part of the trader's overall trading strategy. Likewise, if it turns out that the trader's trading conditions experience a loss. If the price has moved beyond its daily average range, there is a possibility that the market will actually reverse direction against the position the trader took.
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